All the Serious Money is Indexed

A recent New York Times article discussed how index funds are not only the most efficient way for people of modest means to accumulate wealth but are also the best way for wealthy investors to keep and grow their wealth.

The reporter interviewed Princeton professor of economics Burton Malkiel, author of the 1973 investment classic "A Random Walk Down Wall Street" and pioneer in research which shed light on the folly of trying to beat the market. In the article he postulated that of all of the mutual funds in existence or created since the 1970s, the number that actually beat the broad indexes through 2009 would be in the single digits.

The counterpoints in the article from some active managers border on laughable. One compared stocks to baseball batters, saying "If you find the ones with the higher average, you're adding real value." Well no kidding...except that study after study shows that the odds of doing that are about the same as the odds of any single person reading this becoming an American Idol winner.

The same manager also said "We're selecting high-quality companies with earnings streams and eliminating all the bad stocks in the S&P that you have to own because it's an index." Apparently they're buying those great stocks from other active managers who prefer low-quality companies without earnings streams. (Remember they're not buying them from those silly indexers, because the indexers own a proportionate share of everything in the market.)

Malkiel also dispels the notion that commodities belong in a portfolio as a distinct asset class, because by properly diversifying one already has such exposure: "...if you're really well diversified and into emerging markets you're going to have some investments in Brazil, which is natural resource rich. It's simple."

Malkiel also divulges his personal holdings, which include buying some individual stocks "because it's fun. All the serious money is indexed."

How to Stop Collection Agency Calls

(This is a guest article by Garrett Driscoll*)

Debt collectors can be very difficult to deal with. They get paid based on their ability to collect a debt, so they have a pretty big incentive to get the money owed. Creditors (like credit card companies, mortgage holders, etc) outsource these debt collections to collection agencies. These agencies get paid based on what they collect, so they are determined to get that fee. I've recently read that in one instance a collector called a debtor at work 80 times in 1 day. Sometimes a collector's efforts to collect a debt can turn into harassment. This is why you need to know your legal rights.

Fortunately, there are government protections against harassment from any type of debt collector, lawyer, or collection agency. A law called the Fair Debt Collection Practices Act was created to stop unwanted disturbances from collectors. The FDCPA covers personal, family, and household debts like credit card, medical, and mortgage debt. There are certain rules that these collection agencies need to abide by or they are in breach of the law. If they break these laws you can even seek punitive damages against them.

These rules are:

1. They can only contact you between 8 A.M and 9 P.M. local time.


2. They aren't allow to contact you at a time that is inconvenient to you.(such as at work)


3. Threaten to contact people about your debts, such as your boss or neighbors.


4. They cannot misrepresent themselves to be a government agent or employee or a credit bureau.


5. They may also not collect any type of fee or interest on top of the debt that you owe.

The easiest way to get a collector to stop calling you is to send them a letter stating you would like them to cease communication with you. This is called a "cease and desist" letter. After you send them this letter they are allowed to contact you only if: the collection efforts are stopping, or that the collector is going to take certain actions (like proceed with a lawsuit). If they contact you further they are violating the FDCPA. You can even take legal active if these violations are significant.

Make sure and send your cease and desist letter certified mail. This way you can prove that the collector received the letter. This will be important in the future in case you are still receiving harassing phone calls. You definitely should start a file and record the date and times of your communications with the collector. Be sure and photocopy all letters and correspondence with the agency, especially any calls or letter that sound threatening or abusive. Its important to keep a paper trail if you need to prove your case in the future.

If you feel that a collection agency has violated any laws you can report them to the FTC, you local attorney general, or even take them to court. You can sue the collector for up to $1000 in damages if you can prove their harassment led to lost wages or medical expenses. But remember if a collector breaks the law in trying to collect the debt, it still doesn't stop you from owing it.

One more way that you can completely stop collection agencies, is to declare bankruptcy. It is not the recommended method, because it will severely damage your credit score for 7 years, but it will stop all current collection efforts.

When you start chapter 7 or chapter 13 bankruptcy a process called automatic stay starts. Automatic stay will stop all creditors, lawsuits, and the foreclosure process for a period of time. This stay in effect until a judge lifts the stay, the debtor get a discharge, or the debtor no longer owns the property do to bankruptcy.

For obvious reasons you would want to avoid bankruptcy in most cases, but it is available as an option of last resort. If you are in way over your head and negotiating, settling, or managing your debt isn't an option, then you might consider bankruptcy. Otherwise, set up a monthly budget for yourself and work with your creditors. You might be surprised how much they might be able to negotiate with you if you come at them with a plan of action to get your debts paid off.

*About the author: This is a guest post by Garrett from Debt Eagle. Visit debt eagle if you need credit card debt relief. He discusses the differences between debt consolidation, debt settlement and credit counseling.


*Image Credit: Photograph by alancleaver_2000 [via Flickr Creative Commons]

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What Everybody Ought to Know About Bankruptcy

(This is a guest article by Dorothy Anderson*)

Recession has affected a lot of us in disastrous ways. Businesses big and small have gone bankrupt all around the world. Being in debt itself creates a lot of pressure on human minds. To top it, if you are in knee deep debt, you may feel perplexed about the various options available for the repayment of your debt. Many people do not give this problem much of a thought. Instead, they file for bankruptcy, thinking it to be the easiest and safest way out of debt. However, bankruptcy is not a viable option. It should rather be the last resort that you choose.

Bankruptcy is lawful declaration of incapability of an individual to pay his creditors at a given time interval. In case of a personal bankruptcy, you need to surrender your non-exempt property to a court appointed trustee, who liquidates the property and distributes the money to your creditors.

Basically, there are six types of bankruptcy in total; however, the two key ones are as follows:

1. Straight bankruptcy or chapter 7 bankruptcy- In this type of bankruptcy, you can have all your debt cleared, after your assets are liquefied and used to repay your debts. Just remember, that you should not conceal any records related to your present financial condition. You will not be granted any discharge, in case you do so. Relief, in such cases of bankruptcy is available only once in every eight year period.


2. In case you wish to enroll yourself to a wage earner’s plan, also known as reorganization bankruptcy or chapter 13 bankruptcy, this can clear you most of your debt. Once you file for the petition of the plan, you are protected from lawsuits and all other legal actions that creditors could have taken against you. The plan allows you to pay off your debt from your future earnings, while you are under the protection of the court. Your debt is paid according to a debt management plan set up in cooperation with your lawyer. You pay a fixed amount of money each day to a court appointed trustee. The trustee then distributes it to your creditors. The repayment plan is usually of three to five years. The creditors may object to the payment amounts, however, the judge has the final say.

In case, you have a secured debt, like a car loan, that you want to continue paying, then, reorganization bankruptcy is a better option as, chapter 7 bankruptcy requires you to liquefy assets.

According to the US Bankruptcy code, if you have more than $922975 in secured debt and $307675 in unsecured debt, you are not eligible to file reorganization bankruptcy.

In both the above cases of bankruptcy, you need to receive credit counseling from an approved firm, before filing the petition. Personal bankruptcy laws are complex to deal with. Therefore, make sure that you seek advice from an attorney before filing the petition.

So, what are the ways that you can choose to avoid bankruptcy altogether?
Check out the below-mentioned alternatives that you can choose from:

1. Debt consolidation program - This kind of programs help you to make your monthly bill payments at reduced interest rates. Here, you can consolidate all your debt into one easy monthly payment. Moreover, late fees and all other charges are eliminated. This also has a positive effect on your credit ratings. However, there are various effects of consolidating debt.


2. Debt settlement - When you cannot manage even minimum payments on your debt, debt settlement can be an option for you. In this kind of program, the creditors reduce your debt amounts by 40-60%. All you need to do is, negotiate with the creditors. You can obtain help from professional debt settlement firms.


3. Debt management - If you choose to opt for debt management, you need to visit a credit counseling agency. They will offer you a plan to repay your loans. They would help you to get reduced rates of interest on your debt. Furthermore, any interest charges incurred due to late payments would also be waived off.

Also, before filing for bankruptcy, check out the cons of filing for a bankruptcy petition:

1. Filing for bankruptcy will ruin your credit listing - A declaration of bankruptcy will remain on your credit score from six to ten years. This will make it difficult for you to get new loan approvals. Hence, it is always better to pay off your debt rather than go for bankruptcy filing.


2. You may be rendered homeless - Unless, you qualify for state or federal exemptions, and you may lose your car / home. This is because, if you are filing for a chapter 7 bankruptcy, your assets are sold off to repay your dues.


3. You cannot get rid of all your debt - Filing for bankruptcy will not get you exempted from all your debt. There are taxes, student loans etc which you have to pay.


4. Bankruptcy may influence your security clearance status, thereby affecting your financial situation.


5. Not all retirement plans are protected - According to the bankruptcy laws, 401k retirement plans are protected. However, any amount above $1 million is used to pay off your debt.

So, before considering bankruptcy, see whether, it is right for you. Think about the below mentioned points:

1. Try negotiating with your creditors - Creditors are human too. They would rather settle a debt instead of having it discharged in bankruptcy.


2. Get yourself credit counselor - Credit counselors can help you bargain at lower interest rates and monthly payments. Explore the option as an alternative to bankruptcy, since under the bankruptcy law, you will have to get credit counseling advice, before filing for bankruptcy.


3. According to the American Banking Institute, if your creditors have garnished your wages, filing for bankruptcy will stop it.


4. Your medical bills too, can be discharged completely, if you file for bankruptcy.


5. Everyone deserves legal help. Contact a consumer law attorney to discuss about your bankruptcy options. Only, he will be able to review the facts and give you the correct advice.

Ultimately, you can work your way out of bankruptcy, only by changing your spending habits.

*About the author: This is a guest post by Dorothy Anderson. She offers advice to consolidate debts. Dealing with debts is all about choosing the right option.


*Image Credit: Photograph by blehk [via Flickr Creative Commons]

5 Ways To Avoid Getting Stuck In The Credit Card Debt Trap

(This is a guest article by Kris Bickell*)

If you've ever used a credit card, you know how easy it is for the balance to grow REALLY big, REALLY fast. And like a ball rolling down a hill, once it starts rolling ... well, once it starts rolling it's a lot easier to wait until it stops rather than chasing it down the hill.

So, think of credit cards like the ball.

And hold onto them tightly. Because once you start building debt, it's a lot like the rolling ball.

I know, that's much easier said than done. For most people, by the time you figure out you've got a debt problem, you've got a HUGE debt problem!

Trust me, huge debt problems don't go away quickly. Or easily. So do yourself a really big favor. And don't get stuck in the "debt trap" in the first place. One of my friends used to say "Money doesn't come with instructions". Which is so true. And even more true with credit cards. You get all the fine print about terms, rights, penalties, privacy policies. But nothing that tells you "don't charge more than you can pay off when the bill comes!"

I got my first credit card when I was in college. Imagine that!

I had no income. No credit. And no idea how to use it.

Yet American Express thought it was a good idea to give me a card anyway. Why? So they could make money off me, of course. Fortunately, American Express cards must be paid off each month. But the cycle of debt was started when I was only 20.

I remember my friends went on a day trip to Atlantic City and called me to tell me how much they missed me, because there were machines that took credit cards and gave you cash (of course, they didn't really miss me - they just wanted my fancy new AMEX card to use to get cash!)

The moral of the story is that the whole business of credit cards is nothing more than a money machine - for the banks!

So here are those instructions mom and dad never gave you. And American Express never gave you (or CitiBank or Chase or Capitol One, etc.) Here are 5 ways to avoid getting stuck in the credit card debt trap:

1) Don't fall for the lure of rewards cards (unless you can pay off the debt every month):

Rewards cards sound great. And if you can pay off the balances, they are. But if not, you'll probably end up paying a LOT more in interest than you gain in store discounts, frequent flyer miles, or other rewards.

2) Don't keep transferring balance & getting more cards:

Sure, credit card "surfing" is very common - constantly shifting your debt to low interest promotional offers. But in the long run, it's easy just to dig yourself a deeper hole, as you keep getting more and more credit. Want to use this as a temporary "quick fix"? OK. But as a long term strategy, this is like throwing the ball down the hill.

3) If you have more than one card, hide it:

It is tempting to use a retail card to save an extra 5% or 10% on purchases. Or use the new fancy looking card you just got in the mail. Or use the one with the lowest interest rate. And if you can pay it off when the bill comes, OK - then feel free to use them. But if you do fall victim to the temptation often enough, before you know it your credit card ball will start rolling down the hill!

4) Take yourself off the offers list:

The best way to keep yourself from getting caught up in the credit card trap is to keep yourself from getting all the tempting offers in the first place. So go to www.optoutprescreen.com and www.dmachoice.org to get your name off the most common mailing lists!

5) Don't use your credit cards as a spending account:

Make sure to set up a savings account to use for emergencies. Then, when you need some immediate cash, you can use this money instead of a credit card.

So there you have it. Sounds so simple, doesn't it? Sure, it takes some discipline. And many of your friends and family won't understand why you don't rely on credit cards to pay for everything. But if you follow them, these five steps will keep you out of the credit card debt trap!


*About the author: This is a guest article by Kris Bickell. If you would like to learn more about avoiding the credit card debt trap, visit www.Debt-Tips.com. You'll learn how the author, Kris Bickell, paid off all of his credit card debt and the various debt relief options you can use to improve your financial problems.


*Image Credit: Photograph by Leonid V. Kruzhkov [via Flickr Creative Commons]

5 Tips You Can Use to Start Saving Money Today

(This is a guest article by Raine Parker*)

By now, no one needs to be told that the national economy has seen better days. Although there are signs that the recession might be bottoming out, it's too soon to tell. But the slowdown in the market has been a reminder that saving a few bucks here and there is a good idea, and there are great ways to save money even when the economy starts to pick back up. With that in mind, here are five simple ways to pinch pennies and make sure you're prepared for a rainy day:

1. Take your lunch to work.
This is a quick way to see savings. It can cost between $150 and $200 a month to eat out every day, and that's way too much to spend on daily meals. Instead of going broke by eating out, try taking a lunch to work instead. The cost of groceries for a week of meals is far below that of eating out, and as a bonus, you'll be able to pack yourself healthy lunches that are better for you than fast food. You'll start to feel the financial difference immediately.


2. Make a monthly budget.
A great way to save money is to first see how and where it's being spent. Plan out everything: Make a list of all your revenue sources, and then make a list of your expenditures. Be as accurate as possible, and don't leave anything out. Account for major bills like rent and utilities, car and phone payments, and an approximate grocery cost. If your expenditures are higher than your income, that's a big problem, and even if the two figures are close, it's not good. Your list of expenditures will be able to tell you where you can start cutting. Do you really need that DVD or trip to the mall? It's better to think twice and plan your purchases. You'll be less likely to make impulse buys.


3. Pay yourself first.
Take 10 percent of your paycheck and put it in savings right away. It's the best way to start building a savings fund that can be used for emergencies or large planned purchases or investments, but you'll be less willing to do it if you start spending your check right away. If you take 10 percent off the top, you won't even feel it, and before you know it you'll have a comfortable cushion you can use if something unexpected happens.


4. Don't use credit cards.
At all! Plastic money is a wicked gimmick, and though there are benefits to very controlled spending, like improving your credit rating, it's almost never a good idea to just put things on the card. You're less likely to keep track of how much you spend, and before you know it, your interest rate has skyrocketed and your monthly minimum payment is crippling you. If you don't have the money, don't buy on credit.


5. Set small rewards.
This isn't counterintuitive to saving. In fact, small rewards can help motivate you to keep saving and spend wisely. It's that little light at the end of the tunnel that can keep you on the track to smartly dealing with your money. Go out to eat with your partner or spouse; pick up the new album from your favorite band; enjoy a night at the movies. You'll feel the happiness of being rewarded and the satisfaction of knowing you earned it by making the right choices.

These are just a few ways to save money, but they'll get you started on the path to short-term and long-term savings.

*About the author: This guest post is contributed by Raine Parker, who writes on the topics of online accounting degree. She welcomes your comments at her email Id: raine . parker6 @ gmail . com

*Image Credit: Photograph by happyhaggis [via Flickr Creative Commons]

The Secret to Finding a Part-time Job in Tough Economic Times

(This is a guest article by Caroline Fraissinet*)

Part-time jobs are sometimes necessary for students to earn enough money to pay for their education. In these economic times, it can be difficult to find part-time jobs. However, that does not mean that all hope is lost. There are some great resources and places to start which students (or anyone, for that matter) can use to search and apply for jobs. Here is a list of a few general tips and sources for finding a part-time job:

1. Take A Walk Around Town – stores or local businesses sometimes have “Help Wanted” signs on their windows. Many times, people may overlook them, so keep an eye out for them. Take a walk around your neighborhood and see if there’s any in a nearby location. This is more of a hit-or-miss option, as “Help Wanted” signs in the window are more characteristic of a smaller town or community. However, it’s a good starting point because most of the time, you can just walk right in and get a feel for what you might be doing as well as whom you might be working with right away. So take a little stroll around the block – who knows what kind of opportunities you might find?



2. On-Campus Job/Work-Study – college campuses have many services for students. Naturally, that means that a lot of assistance is needed for many of the great places open for the student body. Get in touch with specific locations on campus and see if they have any job openings. Some of the best places to look are the library and any food service locations. Colleges will also frequently post job openings in specific places to students on the university website. If you like meeting new people and being an on-campus leader, residence assisting might be a good option for you. RAs usually get room and board free for supervising specific floors in dorms, and sometimes get a stipend in addition to that for activities. Also, colleges may offer the opportunity for work-study if you qualify. These are more or less the same jobs, but the money that you make goes directly towards your tuition. Sometimes to get enough money to pay for your education, you need look no further than your college or university.



3. Surf The Web – there are countless websites that employers post job openings regularly. Craigslist.org is one of the best places to look for local job opportunities. They have many different subcategories of jobs to search, and also feature a separate section just for part-time jobs. Also be sure to check the “Gigs” section if you’re in a field that would apply (writing, film, ect.) or for miscellaneous jobs that can earn you a few quick bucks. Craigslist also posts many paid research studies, which could be a good way to make some quick cash if you qualify as well. Other places to look include Monster.com, SimplyHired.com and CareerBuilder.com. Keep in mind that internships may or may not be paid, but could also be a good opportunity for students to gain experience and make contacts for later on. Search the web for jobs; it’s one of the easiest ways to discover new job openings.



4. Talk To Friends – sometimes getting a job isn’t about what you know, but who you know. Try asking friends and family about places that they work or worked in the past. They may have some connections or contacts that you can get in touch with for some work. Another possibility is that if you have a friend currently working at a place, they might know about upcoming openings and be able to put in a good word for you. You can also get an insider’s perspective on different places and find out if the employer is someone that you actually want to work for. When job searching, never forget about your friends and family – someone you’re close to could make a huge difference to your finances as well as your social life!

Rough economic times don’t have to signal unequivocal doom to job searchers. There are many different ways to look for part-time jobs for students. By using any or all of these resources, you might be able to find a job that not only pays the bills, but that you might actually enjoy, too. Don’t get discouraged looking for jobs; if you utilize these strategies and are consistent about looking for employment, you should be able to find a great job that can help you to finance your studies.




*About the author: This is a guest post by Caroline Fraissinet, a student at Drexel University in Philadelphia, PA, majoring in Film/Video with a minor in TV Production. More articles by Caroline can be found here.

*Image Credit: Photograph by boogah [via Flickr Creative Commons]

This article was included in the Carnival of Personal Finance #243. Thanks, JD!

Apply for Scholarships, Not Loans!

(This is a guest article by Caroline Fraissinet*)

Let's face it... most college students are always a little short on cash. That means that the opportunity to get a little money is always welcome and very much appreciated. One of the best ways to get some money to finance your education is through scholarships: it not only serves the purpose of paying for all the necessary expenses and allowing you to finance more ambitious goals and projects, but it’s also a great thing to put down on resumes because it shows that the student is hard-working and skilled in a particular field. It doesn't hurt either that scholarships don't have to be paid back, making them a far better option that taking out an education loan! Here are a few types of scholarship opportunities available to college students to consider:

1. University scholarships – most colleges offer specific scholarships available to students if they achieve a certain criteria. Alumni sometimes put aside funds to recognize students that possess a certain skill set or character trait that they themselves may particularly value. Check your college’s resource center for in-school scholarships. They typically have a GPA requirement, and may include a requirement to participate in a certain club or activity, demonstration of a particular quality or skill. Some scholarships may also require an interview, and most require paperwork. Specific majors and departments may also have scholarships and grants available to students majoring in specific fields. University scholarships are typically one of the easiest to access, but competitiveness may depend on the criteria and pool of students.



2. Local/city or town-based scholarships – individual towns and cities usually offer scholarships, but they are usually not very well advertised. This can work in a student’s favor, because if less people know about them, less people are likely to apply. They are usually broader in criteria than university-based scholarships and are typically smaller in amount. The problem with city-based scholarships is that winning them may be more based on who you know rather than what you possess, and they can be more or less competitive depending on the size of the city. However, they can be extremely rewarding and are definitely worth considering in your search for scholarships.



3. State-based scholarships – as you might be able to tell already, for every sub-category of living, there’s usually a scholarship for it. State-based scholarships can work twofold for college students; if you go to a school that is in a different state than you reside, you might be able to apply for both. The criteria is usually similar to city-based scholarships, but may be a little broader. You might be able to find information on broader state-based scholarships while you look for city-based ones. Due to the fact that the pool has been opened up to a larger pool of people and they are typically advertised a bit more, they may be more competitive; however, they are still exclusive enough that they may not be extremely competitive.



4. National scholarships – these are typically the most rewarding, but also the hardest to get. They can range in specificity from having a rare quality or skill to simply being a good leader. They are extremely competitive and usually require a lot more work to be considered for. This is when an updated high school resume really comes in handy; it’s typically the same process for applying for the same types of scholarships in high school, except that you are in a different age range and may be expected to offer different skills or criteria. They are usually very well advertised and very generous. Many nationally successful companies offer them, such as Coca-Cola, Pepsi and McDonald’s. This is one way to go about searching for them; simply go to any large company’s website, and chances are, you’ll find information about a scholarship they offer. Good resources to find other scholarships are FastWeb.com, Scholarships.com and CollegeScholarships.org. (When searching for scholarships online, however, make sure that you are using a FREE website; those that ask you to pay to access scholarships are, 99.9% of the time, scams.)

Scholarships are a great way to get money to finance your education. They range from a few hundred to several thousand dollars, which can help to achieve all of your educational goals and help keep debt at bay. When looking for scholarships, work from more specific to more general to get the perfect fit for your needs and eligibility. Scholarships look great to future employers and show that you take initiative and aim to excel in a particular field or skill set. And of course, your future self will thank you for not having to worry about paying off the loans. When it comes to ways to gain a little extra cash in college, scholarships are one of the best directions to look.



*About the author: This is a guest post by Caroline Fraissinet, a student at Drexel University in Philadelphia, PA, majoring in Film/Video with a minor in TV Production. More articles by Caroline can be found here.

*Image Credit: Photograph by acycakes [via Flickr Creative Commons]